Resolving Ireland’s banking crisis

Abstract

The Irish banking system has been, in effect, on a life-support system since September 2008. Complacency resulted in the banks fuelling the late stage of an obvious construction bubble with massive foreign borrowing, leaving them exposed to solvency and liquidity risks which in past times would have been inconceivable. The Government’s steps to put the system back on a sound basis must have regard both to protecting taxpayers’ interests and to ensuring that credit flows to the economy are not hampered by inadequate capital or liquidity.